Hello Anil Ji i am 58yr of age retiring in Dec 24. My family is myself wife 55yr , unmarried daughter 29yr working since last four yr in reputed MNC with good salary and career prospects. My investment are 1.09 cr of equity, 2.37cr MF equity, 0.56cr MF Debt funds. 65lacs Ulip all premium paid maturing in sept 24. FD in bank 20lacs. Total of 4.82cr. Own 3 Bhk apartment in Metro city where i live approx value 1.45cr. No loans no debts. My question is what should be my asset allocation after retirement my monthly requirement is 1.25lacs and one time expense of daughter marriage in next 1-2 yrs of 30lacs. Thanks

Ans: I appreciate the clarity and the thoroughness with which you've provided your details. It sounds like you have done a fantastic job building your assets. Let's explore how to best allocate your resources after retirement to meet your needs.

Understanding Your Financial Position
Firstly, congratulations on reaching a well-diversified asset base. Here's a summary of your assets:

Equity Investments: Rs 1.09 crore
Mutual Funds (Equity): Rs 2.37 crore
Mutual Funds (Debt): Rs 0.56 crore
ULIP: Rs 65 lakhs (maturing soon)
Fixed Deposit: Rs 20 lakhs
Real Estate: 3 BHK apartment (Rs 1.45 crore)
Your total financial assets come to around Rs 4.82 crore. You have no loans, which is excellent. Your monthly requirement is Rs 1.25 lakhs, and you have a one-time expense of Rs 30 lakhs for your daughter's marriage.

Setting the Foundation: Emergency Fund
An emergency fund is crucial for financial security. Ensure you have at least 6 to 12 months of expenses in a liquid, low-risk account. This fund should cover unexpected expenses without disturbing your investments.

Recommended Emergency Fund: Rs 15 lakhs (12 months of expenses)
Asset Allocation Strategy Post-Retirement
Let's break down a suitable asset allocation strategy:

1. Debt Instruments for Stability
Debt instruments provide stability and regular income. They are less volatile and suitable for your monthly needs. Considering your requirement of Rs 1.25 lakhs per month, prioritize these investments:

Mutual Funds (Debt): Rs 56 lakhs already allocated. Consider adding more to this to ensure stable returns.
Fixed Deposit: Rs 20 lakhs is a good buffer. Keep this as part of your emergency fund and for short-term liquidity.
2. Equity Investments for Growth
Equity investments are essential for growth and to combat inflation. However, post-retirement, the exposure should be balanced:

Equity Investments: Rs 1.09 crore
Mutual Funds (Equity): Rs 2.37 crore
While these investments have higher returns, they come with higher risks. Consider reallocating some equity to balanced or conservative funds to reduce volatility.

3. ULIP as a Diversification Tool
Your ULIP maturing soon will provide a lump sum. ULIPs combine insurance and investment but may not always offer the best returns. Since all premiums are paid and it’s maturing, use the maturity amount wisely.

ULIP Maturity: Rs 65 lakhs. Reinvest this in safer debt funds or balanced funds for moderate growth with lower risk.
Creating a Monthly Income Stream
To generate Rs 1.25 lakhs per month, a mix of Systematic Withdrawal Plans (SWPs) from mutual funds and interest from fixed deposits can be considered.

Systematic Withdrawal Plan (SWP)
SWP allows you to withdraw a fixed amount from mutual funds periodically. This can provide regular income without selling your investments entirely.

SWP from Debt Mutual Funds: Utilize debt funds to withdraw a steady amount monthly.
SWP from Balanced Funds: For a balanced risk approach, include some withdrawals from balanced funds.
Interest from Fixed Deposits
Interest from fixed deposits can supplement your monthly income. Ensure the interest aligns with your monthly needs and reinvest any excess for future use.

Planning for One-Time Expenses
For your daughter’s marriage, earmark Rs 30 lakhs from your existing assets. Consider using the maturity proceeds of your ULIP or liquidating some of your fixed deposits for this purpose.

Adjusting Your Portfolio
Rebalancing Equity and Debt
After ensuring your monthly needs and one-time expenses are covered, rebalance your portfolio to maintain a suitable risk level. Post-retirement, a common approach is to have a 40-60% allocation in equities and 60-40% in debt:

Equity Allocation: Aim for around 40% of your portfolio.
Debt Allocation: Aim for around 60% of your portfolio.
This balance provides growth potential while ensuring stability and regular income.

Diversifying within Debt and Equity
Within debt and equity, diversify to manage risk better:

Debt Funds: Include short-term, medium-term, and income funds.
Equity Funds: Include large-cap, mid-cap, and balanced funds.
Tax Planning
Efficient tax planning ensures you retain more of your income. Post-retirement, tax planning involves:

Tax-Exempt Instruments: Use the tax benefits of PPF and other exempt instruments.
Long-Term Capital Gains: Equity investments held for over a year have favorable tax treatment.
Tax-Efficient Withdrawals: Plan withdrawals from funds in a tax-efficient manner.
Monitoring and Review
Regular monitoring and review of your investments are crucial. Assess your portfolio at least once a year and adjust as needed to align with your goals and market conditions.

Genuine Compliments and Empathy
You've done a remarkable job in securing a diversified asset base. Managing your finances prudently has given you a solid foundation. Your focus on family and ensuring their well-being is commendable. It’s understandable to want to ensure your assets are well-managed post-retirement. I'm here to help guide you through this transition.

Final Insights
Retirement planning is about securing your future while enjoying the present. You've built a strong portfolio, and with the right adjustments, you can ensure a stable, comfortable retirement.

Emergency Fund: Keep Rs 15 lakhs for unexpected needs.
Debt Instruments: Use debt funds and FDs for stability and regular income.
Equity Investments: Maintain equity for growth but balance with lower-risk options.
ULIP Maturity: Reinvest in safe or balanced funds.
SWP: Generate monthly income through systematic withdrawals.
Tax Planning: Optimize withdrawals to minimize tax impact.
By following these steps, you can maintain your lifestyle and meet your financial goals post-retirement. Regular review and adjustments will keep you on track. Wishing you a fulfilling and stress-free retirement.

Best Regards,

K. Ramalingam, MBA, CFP

Chief Financial Planner

www.holisticinvestment.in